More Than Your Fair Share

Hello people, hope you had a great New Year’s party. I’m sure you kept the drinking to a minimum….

Something that is becoming increasingly commonplace in videogames (among other things) is the topic for this next blog entry, the first of 2016. Picture this scenario: you are playing a game; however, there is in-game content that potentially is beneficial to you. Yet it is not given to you just like that. In order for you to use it, you have to buy it with real money. Sound familiar? Welcome to the prevalent world of microtransactions.

What Are Microtransactions?

Perk (2014) gives a definition: ‘Microtransactions (or micro-transactions or micro transactions) are a term that applies to small value financial transactions that happen within digital games and apps.’ Essentially, microtransactions are all about generating extra money. This business model has been increasingly used as a popular method for companies to do just this. The way it works is that within a game, there are additional (and optional) ‘extras’ people can buy using online payment that provides additional benefits or bonuses to their game, although the reason varies from game to game. In order to purchase in-game content, the player needs to enter their card details just like you’d normally do for online payment (e.g. Amazon purchases).

It must be stressed that microtransactions are not mutually exclusive to videogames. In fact, many other businesses implement them. It’s the same for certain software such as antivirus protection. If you downloaded it from the web, you can pick from the basic version (no charge), or for a fee, the premium version which gives more functions and services. In a way, paying to use a premium account is like giving you ‘preferred customer’ status, allowing you to use more of the service. Other websites such as LinkedIn also uses some form of micropayment, allowing users to ‘upgrade’ to the premium version.

There are a number of reasons why this business model is used. Perk (2014) lists some reasons below:

• 1. Small purchases add up very quickly: Some of today’s highest-revenue apps (games in particular) are free for users to obtain, but earn money with microtransactions. These success stories are evidence that users spend quite a lot of money even when individual purchases are small.
• 2. Free-to-play is growing fast: The trend in digital is decidedly towards a free-to-play app market, in which users expect to download or acquire an app/game for free. In 2013, 90% of the Trillion (yes, that’s a T) dollar app market is free to download.
• 3. Implementing microtranscations is easy: Our SuperRewards platform allows any developer to have microtransactions up and running in a few minutes. This means you can accept payments today for the goods or content that increase engagement and make users happy.

It’s an interesting dynamic in regards to the first point. Imagine an in-game content costing 5p, which doesn’t sound a lot admittedly. But if you have an audience of one million players (perfectly feasible) who all spend that 5p, then you are looking at a profit of £50,000. But then you can have people spending loads more, leading to a greater profit. Sometimes, it’s not question of how much it is, rather how often they spend. That is just an example of the potential profitability of microtransactions.

This business model is increasingly relevant to games colloquially known as ‘free-to-play’. Free-to-play games generally means there is no charge to play the game in its base form, but in order to take advantage of the bonuses or specials, one needs to cough up for the benefit. So in the strictest sense, they are not free-to-play unless you plan on not paying for any benefits. A lot of mobile phone apps fall under this category. There are some pretty big examples such as Farmville, Angry Birds and Fruit Ninja that are free-to-play with optional micropayments.

As Perk (2014) explained, this trend is on the rise. Team Fortress 2 is a very popular game on Steam, which used to be a full game but has since converted to a free-to-play model in order to take advantage of microtransactions, of which there are many. And while I’m on it, Steam itself is a walking billboard for online payments. I’ve been banging on about the Steam Market and all about the collaborations and transactions between the players (insert post link here).

Lori Bray agrees (2013), stating: ‘Keeping the title free means fewer barriers to entry and a more efficient cost-per-install. Micro-transactions also mean that far more granular price points can be developed, converting a wider base of users who might not be willing to maintain a €12/month subscription or purchase a retail box for €30-40.’ Because of this, players are not hit in the pocket quite so much and can spend more on the game as a whole.

How Are They Implemented?

As stated above, microtransations/micropayments are popular within free-to-play games. Let’s face it, game designers have to make money somehow otherwise they’d go bust; same with any other business. Microtransactions are a way of providing an incentive for players to make in-game purchases and keep the game running as a free-to-play model.

The idea of going free-to-play in the first place is to entice players, to get as many people into the game who may otherwise have been put off by the (sometimes) extortionate price tag of retail games. Come on, have you ever seen a game you wanted but bulked at the asking price? Think of the poor people who play on consoles when they have to shell out £40-50 for new games. Free-to-play games offer a different alternative for people who are reserved with their money. The player doesn’t lose out financially if they don’t like the game so it’s less hassle about getting money back.

Many successful free-to-play games are massively multiplayer online role-playing games. This is not surprising given that these MMORPGs can have huge scope in their content. Often the size of the in-game world is vast, allowing players to explore to their heart’s content and therefore allowing developers to maximise micropayments. World of Warcraft is a big player in this genre. When you have as many people as World of Warcraft does, it presents a very good opportunity to rake in the money.

The game introduces in-game items that are extremely valuable, such as extra damage or health boost, but of course, you can’t give it to everyone otherwise that would devalue it. Instead, the developers use micropayments: players wanting the items must pay for it to have the right to use. For these types of games, the ‘money’ is usually called whatever in-game currency the game uses. In World of Warcraft, the terms ‘coin’ or ‘gold’ are used in place of real money in keeping with the game’s fantasy setting. The conversion rate from real money to whatever in-game currency is used varies. For instance, £10 real money equates to ‘£10’ of coin, but not necessary the same value.

Case Study: World of Warships

Let’s look at an example of a free-to-play game, subsuewntly one I have been playing recently. It is called World of Warships, which is part of the Wargaming series. I quite like the cool explosions of battleship guns, but that’s another story.

World of Warships has a loyal and popular following, but that doesn’t mean they can operate completely free. Everyone who creates an account and downloads the game initially does not pay any price to play it. This creates an opportunity for the player to experience what the game offers.

As with many games, there is a system of ‘levelling’. Basically, as the player accumulates more experience and credits in the game, the higher their level goes. Everyone starts at Rank 1, with progression to Rank 11. With more experience gained, players can spend it on better ships.

However, it is a slow process to rank up. As an added incentive, the player may instead purchase what is called in-game as a ‘premium account’ to speed things up a little. There are certain versions to purchase such as 1 Day accounts all the way to 1 Year; it depends how much the player wants to spend. I think the rate for 1 Day is 80p, which is not a lot but can add up with continual use it.

The bonus of having a premium account is 50% extra experience gained in battle. So if I earned 100 experience points, having a premium account would then give me 50% more so I’d end up having 150. It may not seem much but it goes a long way to getting that next best ship. For a while I didn’t spend any money but I eventually did out of curiosity, and I must admit, I have spent more than I’d like to (but still not a lot to make a massive dent in my bank account). That’s the thing with free-to-play games, you spend what seems an innocent amount at first, but it slowly spirals into more as you spend more time in the game. It’s almost like gambling.

wow store page

A screenshot of World of Warships ‘Premium Store’ listing various deals on doubloons

There is an in-game currency called ‘doubloons’. Their role is to create a monetary system in the game. A dedicated website ‘store’ allows players to add funds in exchange for doubloons to use in-game. As I said before, real money and in-game money are not necessary the same value. I think 1000 doubloons is £3.60 of real money, which is quite expensive actually. That could buy you a decent lunch. Doubloons can be used to purchase special camouflage, signals, ships or flags to use. Of course, the better the extra, the more it costs.

Paying-To-Win

While microtransactions are beneficial to developers of free-to-play games, the practice has drawn criticisms amide what is perceived as an obvious attempt to fleece more money. No-one denies that companies have to make money anyway, but what is disliked is that with the myriad of microtransactions, it gives the impression that the biggest concern for designers is how to make as much money as possible. According to PCGamer (2013:1), “Free-to-play” and “microtransactions” are dirty terms to some. That’s understandable. Famous Facebook Skinner boxes like Farmville have clouded attitudes toward today’s free-to-play games, and there’s an assumption all microtransaction-driven game design is handicapped by the need to create ways to charge players.’

The article continues to say, ‘a lot of the distrust toward microtransaction-driven games comes down to the way they habitually obfuscate both what exactly you’ll be paying for, and how much you’ll be paying for it. This starts with the standard practice of exchanging of standard currency for fake fun-bucks equivalents. In Rift, it’s “Credits”, in The Old Republic, it’s “Cartel Coins”, in War Thunder, it’s “Golden Eagles”, to name just a few. The deliberately awkward exchange rates are of course designed to hide the actual value of the items you’re buying, but hiding the value of every transaction at this fundamental level appears dishonest. There’s a widespread lack of clarity around the payment systems attached to free-to-play games. The price and payment method of engaging with a game should be quickly apparent, and expressed in a way that lets players know exactly what they’re getting for their money’ (PCGamer, 2013:1).

This point is important, as it can be confusing for players to know exactly what they are potentially buying, and more significantly, whether is it worth it. Here is a screenshot of the store of World of Warships. The in-game currency is doubloons, but you can see the different rates, so for 500 doubloons, you need to pay £1.69. For 30,500 doubloons, the price is £75.50. These are actually very expensive for, to be honest, not that much. You can easily use that many doubloons very quickly and end up spending more real money even quicker. It seems insane to spend that much but people do it.

This environment that free-to-play games promote has lead to the term ‘pay-to-win’ which is not complimentary by any means. Pay-to-win is the idea that in order for you to have success in the game, you need to spend real money for those special bonuses and abilities. For balancing purposes, these extras are mainly cosmetic items such as clothes or costumes so as not to give too much of a disadvantage to those who have not paid. However, depending on the game, it doesn’t work like that. Some games clearly have a competitive edge so players who spent have an advantage to possessing powerful items like weapons which can’t be obtained any other way.

So I guess what the real reason as to why pay-to-win exists as a term is the principle behind micropayments. As Phil Hartup (2015) writes, ‘Principles, even in something as wretched as the videogames industry, matter. What Konami and other companies are up to represents a very real problem in videogames. The wanton, gratuitous monetisation of any aspect of any game that a developer thinks they can squeeze a dollar out of is a sickness within the industry and it’s not without consequences. Games are built to accommodate pay-to-win mechanics.’

He goes on to say, ‘The greed of the games industry manifests itself in other ways too. The pre-order culture that now employs glorified pyramid schemes to secure early sales. Paid-for mods, a concept roundly rejected by players that may yet resurface with the release of Fallout 4. The pre-order DLC (downloadable content) packs where developers place chunks of content behind unnecessary pay walls or tied to specific sellers, preventing players from owning the whole game on launch day’ (Hartup, 2015).

I have to agree somewhat with what he’s saying. Sadly, it is increasingly becoming the standard industry practice. We looked at paid-for-mods in a previous post regarding Skyrim and that idea did not go down well with the players. They feel mods should be accessible so by slapping a price tag on them it restricts access. Again, it’s not about so much the money, it’s about the principle being implemented that it’s just another way to gain it.

For free-to-play games, nobody denies the developers shouldn’t make money from them. Yet with the myriad of potential in-game content, it seems that to get anywhere in the game, you have to spend, and spend lots. World of Warships has a levelling system where you’d have to raise enough points to get the next best ship. The process gets exponentially longer the higher you go, so it almost feels ‘obliged’ or even ‘necessary’ to upgrade to a premium account to get there faster.

This Is This Reality?

It would certainly seem so. In a world where we spend so much, so fast online, it was only a matter of time before the idea of micropayments caught on in games. In fact, the free-to-play model has expanded the games industry to accessible levels, allowing even the smallest of companies to grow that wouldn’t have been possible if they sold their titles in retail. Ethan Levy (2014) makes this point, summarising, ‘meanwhile, the influence of free-to-play has only grown over time. Not only was it the dominant business model on social network and mobile phone games, but its influence could be felt on console and PC, too. Struggling subscription-based MMOs found sustainable success in microtransactions (MTX), Team Fortress 2 went free-to-play and League of Legends conquered the world while selling champions and skins. F2P juggernaut World of Tanks was ported to the 360.’

Levy (2014) adds, ‘last month I ran a survey about gamers’ DLC and MTX purchasing habits. Over 2,700 gamers answered questions about how they have spent their money in the past 3 months. The results may surprise you. 1 in 10 gamers have purchased MTX in a premium AAA game in the past 3 months. 6 in 10 gamers have played a free-to-play mobile game in the past three months and 1 in 10 have made a MTX purchase in those games…these are, on average, 25 to 34-year-old men with full-time jobs making microtransactions inside premium console and free-to-play mobile games.’

Of course, this is not without its criticisms as we’ve had a look at. I’m not suggesting that companies shouldn’t make money, of course they do. But some of the practices do seem like fleecing people for extra money and the games industry is a lucrative business. The fact that there are so many microtransactions in-game accessible only by paying seems to reinforce this. Some of these micropayments may seem small at first, but continual usage will begin to dent the wallet.

Even AAA games have taken this route with what is called a ‘season pass’. It basically means that the player has paid for all the upcoming downloadable content (DLC) for a season. I think what we’ll begin to expect is that people will have to buy the game ‘in pieces’. As Perk (2014) said before, small payments add up big-time. If you have enough people paying then companies can bank a tidy sum, far more than they could if sold in shops.

I try not be against micropayments because I know they are vital for smaller companies to get recognition and profit. It’s hard enough in an already-congested industry to make a name for yourself as it is. But with free-to-play on the rise, as a gamer myself, I certainly  understand the criticisms of microtransactions and what they represent. It’s not nice to pay for something only to have to pay for something else just to get anywhere in the game. Before you know it you spend far more than you wanted. It’s easy to do that at the click of a button.

Bibliography

Lori Bray’s article ‘Microtransactions: 3 Common Mis-conceptions’

 http://www.gamesparks.com/blog/micro-transactions/

Phil Hartup’s article ‘Pay-Win, How Videogame Companies Exploit Players Deliberatrely’

http://www.newstatesman.com/culture/games/2015/10/pay-win-how-videogame-companies-exploit-players-deliberately-poor-design

Ethan Levy’s article ‘Why microtransactions aren’t going away anytime soon’

http://kotaku.com/why-microtransactions-arent-going-away-any-time-soon-1674260827

PCGamer’s article ‘Microtransactions: the good, the bad and the ugly’

http://www.pcgamer.com/microtransactions-the-good-the-bad-and-the-ugly/

Perk’s article ‘What are micro transactions and how do developers use them?’

http://www.superrewards.com/micro-transactions

 

 

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